Cars are a necessary part of life for most Americans, especially if they live somewhere without reliable public transportation. Most people can’t afford to pay for a car outright, even if it’s used.
Applying for an auto loan with a credit union can get you the help you need. Credit unions offer terms that are usually more favorable than those of banks or even your local car dealership. Due to their unique structure and governance, credit unions are dedicated to providing products and services at low rates to as many members as possible.
What to Look for in an Auto Loan
The length and interest rates of auto loans can vary dramatically. Typically, longer terms result in lower monthly payments, but also require higher interest rates. This increases the total amount you will pay over the life of the loan. The interest rate also increases for larger loans, and may decrease if the buyer is willing to make a larger down payment.
New car auto loans typically have lower rates than used cars. This is because creditors must consider the value of the car, which secures the loan, in assessing how likely they are to get their money back if the loan recipient defaults. Used cars’ value depreciates much more quickly, so they are not as valuable for securing loans.
The term on new car loans can also be much longer than that of used car loans. This is because new cars typically cost more than used cars, so the term of the loan must be longer to make the monthly payment manageable.
Your credit score has a huge influence on the terms and rates you qualify for, especially at for-profit institutions. However, some financial institutions strive to give better terms and conditions than others. Instead of just accepting a high interest rate without questioning it, seek out a nonprofit solution that works for you.
What is a Credit Union?
A credit union is a financial institution that offers checking accounts, savings accounts, loans, and other financial services, much like a bank. The key difference between credit unions and banks is that credit unions are strictly nonprofit. Although they hold onto some money to cover salaries and other expenses, much of the money credit unions make is used to provide better service and dividends to members.
Credit unions are governed by a board of elected members, and must follow the rules and regulations of the National Credit Union Administration. The exact services and products offered vary between credit unions, but even local credit unions can provide a range of services to meet your needs.
Benefits of Credit Unions
Despite being smaller than banks, credit unions can be a better option for families. Terms and rates offered by credit unions are often better than those offered by big banks, because credit unions don’t have to prioritize making a profit.
Credit unions also have more personalized customer service due to their smaller size. Even credit unions that serve a large geographic area have loan officers and other staff who know the local economy and understand families’ needs.
Instead of relying on different financial institutions for checking, mortgages, short-term loans and auto loans, credit union members have access to a full range of personal banking services at great rates.
Why Banks Aren’t Always the Best Deal
Instead of offering better deals banks often just have more services available. They may focus on making more of their money available to small or large businesses, instead of making better loan deals for working families.
Because they are for-profit and controlled by a board of directors that isn’t elected by the members, banks aren’t focused on the families they serve. They have to worry about creating the largest profit margins possible for their shareholders, instead of serving all of their members equally.
Getting Loans through Dealerships
Auto dealerships will often work with customers to secure loans, whether dealer-financed or through partnering credit unions. However, these deals are often not as good as they look. The dealership often takes a cut of the money or gets to charge a slightly higher interest rate as commission.
When you’re shopping for a new car, it’s best to get pre-approved for a loan from your own credit union, then bring the pre-approval letter in to the car dealership. From there, the dealer will contact the credit union to arrange the finances once you choose which car you want to buy. This gets you the best deal possible without relying on a middleman.
What Rates Can I Expect?
Car loan rates vary depending on market factors and your own credit score. The best way to find out is to complete your initial application online, then talk with a loan officer to determine how your loan terms can be tailored to suit your needs.
At T&I Credit Union, we offer rates as low as 1.99% on loans with 60-month terms for new cars, and as low as 2.99% on used cars. Rates can fluctuate slightly each quarter, so start looking for your next car as soon as possible to get the best rate.
Auto Loans with Poor Credit
People with poor credit may struggle to find auto loans at a decent rate. Whether your credit is poor due to high standing credit card debt or due to missed payments in the past, your approval odds drop sharply if you’re seeking a loan from a for-profit institution.
Having no credit may also be a problem with some lenders. Although you can often get a loan by having a parent or spouse co-sign on the loan, it can be hard to get them to agree to do so. You also may be able to get a small loan amount, but not enough to buy a car.
Credit unions know you’re more than just a number. Cars are essential for getting ahead in life, and we want to see you succeed. Credit unions offer secured loans that give you a chance to rebuild your credit. If you want to buy a new car in the future but know that your credit history may be a problem, talk to a credit union loan officer to work out a way to boost your score.
Credit Union Auto Loan Solutions
T&I Credit Union puts members first, and strives to provide the best auto loan rates possible. As a credit union, our goal is to be good financial stewards and serve the community instead of making a profit. Our team works hard to provide you with a loan deal that works for you, even if you have poor credit.
We serve seven counties in the Detroit Metro area, so we know the regional market well. Whether you’re a first-time car buyer or are getting another vehicle for your growing family, we have the auto, motorcycle, and other vehicle loans you need to keep you on the road.
We also have a range of other personal and home loans available for members, making us a convenient provider for all your financial needs. Call us at 1 (800)-338-3908 to learn more about membership and services.